A bank or a mortgage company, which offers home loans can be referred to as a ‘mortgage lender’. There are eight different categories of primary mortgage lenders. These are correspondent lenders, mortgage brokers, wholesale lenders, direct lenders, portfolio lenders, mortgage bankers, online mortgage lenders, and sub-prime mortgage lenders. check here for more info.
Here, the first three categories are described in detail.
o Correspondent Lender:
An institution or an organization that can authorize loans on behalf of a mortgage lender is referred to as a ‘correspondent lender’. In other words, the correspondent lenders act as agents or sponsors of several lenders during the origination and closing of loans. They are the ones who underwrite the loan. They also service the loans for the lenders. They do not group the mortgages for resale. Instead, they sell them individually. This is how they differ from mortgage brokers and other lenders.
o Mortgage Broker:
An individual or an organization that arranges financing for the borrowers through portfolio lenders, mortgage bankers or any other source is called a ‘mortgage broker’. A mortgage broker, thus, acts as an intermediary between the lenders and the borrowers.
These brokers help the borrowers to choose the appropriate loan program, fill out the loan applications, and locate a lender who can fund the loan. They also help to obtain the credit report, appraisal etc.
o Wholesale Lender:
Any institution that funds and underwrites mortgage loans is referred to as a ‘wholesale lender’. It also services the loan. However, a wholesale lender does not deal with the borrowers directly in the retail end of the market. Instead, it deals with a third party, which can be a mortgage broker. A wholesale lender who keeps some or all of its mortgages is called as a ‘portfolio lender’. On the other hand, the wholesale lender that sells its mortgages is a ‘mortgage banker’.